Book Chapter
Mitigating Negative Consequences of Unexpected Environmental Shocks: PES Programs, Climate Uncertainty, Insurance, and Inspections (with Sahan Dissanayake and J. Forrest Williams) (chapter #17 in "Behavioural Economics and the Environment: A Research Companion", Routledge publication, 2023)
Work in Progress
Voting under Contradictory News (with Quazi Shahriar) (accepted for publication at Journal of Economic Behavior & Organization)
Abstract:
How much do opposing news sources distort private information and how do voters use distorted contradictory information regarding candidate quality? In a two candidate voting game, we derive and experimentally test an ``average-opinion'' hypothesis, where two opposingly biased sources, capable of forming an unbiased estimate of candidate quality as well as a distorted estimate within a bound, symmetrically distort their reported estimates in opposite directions, and voters split the estimate difference to decipher the unbiased estimate. Data support the hypothesis and show that voters benefit from sources' competition, compared to a control treatment without competition. When sources are allowed to distort unrestrictedly, babbling equilibrium is predicted, but results still indicate the average-opinion behavior. Finally, even when sources are asymmetric in their ability to distort, voters perform remarkably well to form an adjusted average-opinion, which allows them to vote for the right candidate.
Published Papers
Why is dishonesty difficult to mitigate? The interaction between descriptive norm and monetary incentive (with Quazi Shahriar) (vol 80, 102292, Journal of Economic Psychology, 2020)
Abstract:
We examine whether a perceived norm of a high level of dishonesty makes the propensity to be dishonest insensitive to a lowering of payoff from dishonesty. We find support for the hypothesis in a laboratory experiment on lying behavior in a cheap-talk sender-receiver game, conducted in societies with different preferences for honesty. The finding (a) suggests that the sensitivity of lying to payoff established in the literature can partly be explained by uncontrolled changes in perceived norms that accompany changes in payoff from lying, and (b) can be conceived as an indirect evidence for why policies aimed at curbing dishonesty by reducing private pecuniary gains from dishonesty may fail in societies with history of high dishonesty. We also find self-serving incorporation of norm in decision-making in that a perceived norm of a lower level of lying does not quite dampen the effect of an increase in the payoff from lying, highlighting the challenge even societies with history of low dishonesty may encounter in maintaining a low level of dishonesty in the face of changing pecuniary incentives.
Deception: The Role of Uncertain Consequences (with Subhasish Dugar and Quazi Shahriar) (vol 114, pp 1-18, European Economic Review, 2019)
Abstract:
We study how decisions to lie extend to risky environments. We provide experimental evidence from a sender-receiver game where there is uncertainty over the amount by which a lie reduces its recipient’s payoff, which is known only to potential liar. Even though all reduction amounts are equiprobable, we find that, unlike truth-tellers, most liars underestimate the extent of the actual harm and exploit this self-serving bias to lie substantially more in presence of the uncertainty. Subsequent treatments establish the bias by removing confounds like senders’ risk-preferences. An intervention treatment nudging senders toward correcting the bias reduces lying.
On Monetary and Non-monetary Interventions to Combat Corruption (with Ritwik Banerjee) (vol 149, pp 332-355, Journal of Economic Behavior & Organization, 2018)
Abstract:
We study the relative effectiveness of extrinsic monetary disincentives and intrinsic non-monetary disincentives to corruption, using a harassment bribery game. In doing so, we also test the Beckerian prediction that at the same level of expected payoff, a low probability of detection with high fine is a stronger deterrent to corruption than a high probability of detection with low fine. In Experiment 1, two treatments are designed to study the effect of a low probability of detection with high fine and a high probability of detection with low fine, on bribe taking behavior. In Experiment 2, subjects participate in the same baseline harassment bribery game either without or after having gone through a four-week ethics education program. Results show that: (a) a low probability of detection with high fine reduces both the amount and the likelihood of bribe demand, (b) a high probability of detection with low fine has no effect on bribe demand, (c) normative appeals of ethics education has a small effect on the likelihood but not on the amount of bribe demand, when measured immediately after the intervention, (d) the effect of ethics education vanishes when measured four weeks after the intervention.
Green Electricity Markets as Mechanisms of Public-Goods Provision: Theory and Experimental Evidence (with Michael Moore) (vol 71, pp 45-71, Environmental and Resource Economics, 2018)
Abstract:
Utility-based green electricity programs provide market opportunities for consumers to reduce the carbon footprint of their electricity use. These programs deploy three types of public-goods contribution mechanisms: voluntary contribution, green tariff, and all-or-nothing green tariff (Kotchen and Moore 2007). We extend the theoretical understanding of the all-or-nothing green tariff mechanism by showing that an assumption of warm-glow preferences is needed to explain widespread participation in programs deploying this mechanism. We conduct the first experimental test to compare the revenue generating capacity of a pure public good (based on the voluntary contribution mechanism) and an impure public good (based on the green tariff mechanism). In experimental play, the voluntary contribution mechanism raises 50 percent more revenue than the green tariff mechanism. With the all-or-nothing green tariff, experimental play and regression estimates show that a warm-glow preference positively affects participation, as predicted by the theory.
(Note: Although I wrote this comment separately, it was later subsumed in the Environmental and Resource Economics paper above)
Summary:
This comment refers to the study of Kotchen and Moore (2007, JEEM; 53, 1-16) on private participation mechanisms in green energy programs. The authors develop a framework for the voluntary contribution mechanism (VCM), the flexible green tariff mechanism (FGTM) and the all-or-nothing green tariff mechanism (A/NGTM) under symmetric Nash Equilibria, and empirically test some predictions using household data on participants and nonparticipants. I show that the presented theory of the A/NGTM should be modified and should ideally include a more restrictive constraint than what the paper discusses. A generalization of the restrictive constraint yields important insights, contrasting to what one would presume otherwise. As the number of participants increases, the green energy premium should continually decrease to generate a (small) positive provision under the symmetric equilibrium.
Parties, Politics and Regulation: Evidence from Clean Air Act Enforcement (with Robert Innes) (vol 53, pp 522-539, Economic Inquiry, 2015)
Summary (for shorter version, see abstract of the paper):
This paper studies the role of Congressional politics in environmental law enforcements of the Clean Air Act (CAA) in the United States, for the period of 1989-2005. We analyze whether there exists any implicit link between a local politician’s (Congressman or senator) party affiliation and the number of the CAA enforcements by the Environmental Protection Agency (EPA) in facilities that fall under the jurisdiction of that politician. The presence of such potential link between local politician's affiliation and environmental law enforcements may have grave policy implications; it may lead to an uneven distribution of pollution resulting in public health related concerns and excessive lobbying by the interest groups.
In one of the seminal papers on environmental law enforcements, Deily & Gray (1991) document that enforcements are sensitive to the economic circumstances of the regulated firms and the surrounding areas. A parallel literature on the common agency problems and environmental policy suggests that the design and/or implementation of an environmental policy can be motivated by political considerations (Damania, Fredriksson & List, 2003, Fredriksson & Svensson, 2003). On the other hand, a vastly extensive political science literature debates on the issue of Congressional control over bureaucracy (several schools of thought).
The extant economic and political science literature, however, do not consider a local politician's preference as a potential determinant of local environmental law enforcements. We aim at bridging this gap in the related literature. Employing the techniques of panel data for count models, and using political, demographic, income data from various sources and mapping them with the EPA’s facility level inspection data on ambient air quality, we find evidence that local political affiliation matters for environmental law enforcements. On an overall basis, the local Republican politicians tend to reduce facility level inspections compared to their Democratic counterparts and the magnitude of such reduction marginally increases with the politicians' seniority at the office.
We verify robustness of the result by generating a completely random exogenous variation in the political affiliation of local Congressmen that are elected from the closely fought open districts. The chance of a Republican win (vs. a Democratic win) in these districts is almost fifty percent no matter whichever party held the seat before. We apply the standard techniques of regression discontinuity and difference-in-difference and finds that our earlier result continues to hold. The party affiliation of even these newly elected least powerful Members of Congress has a statistically significant impact on the CAA enforcement and the direction of impact is in conformity with our earlier finding.
Bertrand Competition with Asymmetric Marginal Costs (with Subhasish Dugar) (vol 54, pp 1631-1647, Economic Inquiry, 2016)
Abstract:
This article tests the prediction of three discrete asymmetric duopoly price competition games in the laboratory. The games differ from each other in terms of the size of the cost asymmetry that induces a systematic variation in the difference between the firms’ marginal costs. While the standard theory requires the low-cost firm to set a price just equal to the high-cost firm’s marginal cost, which is identical across all three games, and win the entire market, intuition suggests that market price may increase with a decrease in the absolute difference between the two marginal costs. We develop a quantal response equilibrium model to test our competing conjecture.
Is Dishonesty Contagious? (with Robert Innes) (pdf: working paper) (pdf: published paper) (vol 51, pp 722-734, Economic Inquiry, 2013)
Summary (for shorter version, see abstract of the paper):
This paper investigates the role of perceived norms in individual decision making in absence of monitoring, social sanction and reputation formation. Two questions are of paramount importance in this regard: (i) Are individuals sensitive to perceived norms if no one issues explicit directives to them? If so, (ii) how can one alter such perceived norms in a manner that promotes honesty and enhances social welfare in an otherwise corrupt society? We study only the first question and leave the second question as an agenda for future research. We follow an asymmetric information deception game, patterned after Gneezy (2005), wherein we stimulate perceptions of honesty and dishonesty and study whether individuals are contagious to such perceptions. We find evidence that individuals are heavily (partly) contagious when they believe that peers are predominantly dishonest (honest), and that the existing theories of social preferences (such as the guilt-aversion theory of Charness/Gneezy & Dufwenberg, 2006, the inequity aversion theory of Fehr & Schmidt, 1999) are unlikely to explain this finding. Social planners in a corrupt society can exploit the self-reinforcing nature of the perceived norm of honesty/dishonesty to improve the level of individual honesty and trustworthiness. It is now important to explore alternative avenues that have the power to manipulate social norms.
State Medicaid Fees and Access to Primary Care Physicians (with Rajiv Sharma, Sarah Tinkler, Sudeshna Pal, Raven Susu-Mago and Miron Stano) (vol 27, pp 629-636, Health Economics, 2017)
Abstract:
Medicaid and uninsured patients are disadvantaged in access to care, and are disproportionately Black and Hispanic. Using a national audit of primary care physicians, we examine the relationship between state Medicaid fees for primary care services and access for Medicaid, Medicare, uninsured, and privately-insured patients who differ by race/ethnicity and sex. We found that states with higher Medicaid fees had higher probabilities of appointment offers and shorter wait times for Medicaid patients, and lower probabilities of appointment offers and longer wait times for uninsured patients. Appointment offers and wait times for Medicare and privately-insured patients were unaffected by Medicaid fees. At mean state Medicaid fees, our analysis predicts a 27-percentage-point disadvantage for Medicaid vs Medicare in appointment offers. This decreases to 6 percentage points when Medicaid and Medicare fees are equal, suggesting that permanent fee parity with Medicare could eliminate most of the disparity in appointment offers for Medicaid patients. The predicted decrease in the disparity is smaller for Black and Hispanic patients than for white patients. Our research highlights the importance of considering the effects of policy on non-target patient groups, and the consequences of seemingly race-neutral policies on racial/ethnic and sex-based disparities.
Insurance, Race/Ethnicity, and Sex in the Search for a New Physician (with Rajiv Sharma and Miron Stano) (vol 137, pp 150-153, Economics Letters, 2015)
Summary:
How does access to primary healthcare in the United States relate to a patient's insurance type, race/ethnicity, and gender? This paper reports results from an experiment, conducted in the manner of an audit study, on non-standard subjects from the market for primary healthcare. The results indicate potential discrimination against Medicaid patients, particularly from the minority groups.
Work in Progress:
The Choice of Provision Mechanism: A Study of Green Electricity Programs (with Michael Moore)
Purity in Markets for Green Goods (with Erin Krupka and Thomas Lyon)
Appease the Opposing Marginal Voters: Close-Election Politics and Enforcement of the Clean Air Act